I’ve often wondered why everyone is constantly worrying about their property values to the point that they enter into extremely restrictive home owner association arrangements so that a committee of strangers can tell them whether or not they can park their car in the driveway. Money magazine even has an article talking about how overgrown bushes can take 3% away from your home’s value: http://money.cnn.com/2012/08/09/real_estate/home-value.moneymag/index.html. Doesn’t that mean you can reduce your property taxes by 3% per year by letting them grow, and then trim them up when you want to sell?
It is often said that your home will be your biggest asset. For many people this is the case, and the home has been a wonderful asset in the past for the average person since the average person saves up very little money during his lifetime but the equity in his home would grow. In times past at least he would own his home by the time he was ready to retire. He could then sell the big family home, put a lot of the money into the bank, and then buy a small condo and live on the savings.
Unfortunately, we’ve gotten to the point now where our spending isn’t limited to spending everything we have, but spending even more. Many people are cashing out the equity in their homes as soon as it becomes available. For them, that dinner out or trip to the mall will still be there on their monthly mortgage bill long after the food has been digested and the trinkets they bought are broken.
Even if you do nothing else, protecting your home from runaway spending will at least provide some security in your old age. Put 20% down so that you have some shelter against price fluctuations that would trap you in your home with a 0% down loan. Get a short-term loan (15 years or less) so that you’ll have the place paid off by the time college tuition costs start to come due. Leave the equity in your home and resist touching it for any reason – that’s your future. Get rid of all of your credit cards so you can’t spend more than you have so you won’t even think about touching your home equity. Finally, when you are ready to use the equity, just sell the place and downsize rather than doing a reverse mortgage with the high fees.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.